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Shares of Johnson & Johnson Healthcare (JNJ 0.23%) are down more than 13% this year, even as the S&P 500 is up 4%. In fact, the stock is trading just above a 52-week low. Does the recent stock market crash provide an opportunity? Johnson & Johnson has become one of the recommended stocks for income investors. Here are five reasons why Johnson & Johnson might be a smart buy right now.
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The company’s revenue rose 1.5% to $94.9 billion last year, and forecasts growth of 4.5% to 5.5% this year, while it is expected to average between $96.9 and $97.9 billion. This should come as no surprise as the company has been able to grow its revenue for seven years in a row.
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Over the past decade, Johnson & Johnson has grown annual sales by 33.1% and earnings per share (EPS) by 39.9%. Last year was different, as the company’s EPS was $6.73, down 13.8%, mainly due to inflation, increased shipping costs and the negative impact of a strong dollar on the market.
The company’s CEO, Joaquin Duato, said he expects J&J’s pharmaceuticals division alone to generate $60 billion in annual sales by 2025, with Darzalex, Tremfya, Erleada and Uptravi being the biggest drivers in the region.
Multiple myeloma treatment Darzalex will have a market cap of $7.9 billion in 2022, up 32.4 percent. Plaque and psoriatic arthritis drug Tremfya brought in $2.7 billion last year, up 25.4 percent. Prostate cancer treatment Erleada had $1.8 billion in revenue, up 45.7 percent. Sales of Uptrav, used to treat pulmonary hypertension, were $1.3 billion, up 6.9 percent.
Duato said he also expects strong growth this year from three recently launched treatments, Spravato, which is used to treat depression, and two drugs for patients with relapsed and refractory multiple myeloma, Carvykti and Tecvayl.
About Johnson & Johnson
Johnson & Johnson is the type of stock that people want to hedge their investments in when no one really knows where the market is going.
That’s because the business does well in the off-season. Inflation and interest rates remain an issue and there are serious concerns about the health of the banking sector. This uncertainty points to bad months for the market.
A recession does not affect health care costs or the overall level of health care. With more than 140,000 employees and more than 135 years of experience, Johnson & Johnson is considered a safe bet in the industry.
Johnson & Johnson has increased its quarterly dividend for the 60th consecutive year and expects to do so next month when it announces a quarterly dividend increase. The last increase was 6.6% last April to $1.13 per share.
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At the current price, that’s about 2.97%, well above the S&P 500 average of 1.74%. The company’s strong cash flow should allow it to continue raising its dividend even at its current payout ratio of 68%.
In December, Johnson & Johnson completed its $16.6 billion acquisition of heart pump maker Abiomed. The company said it expects the deal to be accretive to results through 2024. Its sales force and supply chain should help the Impella pump manufacturer increase its current sales force.
In fiscal 2022, Abiomed posted annual revenue of $1.03 billion, up 22 percent, and margins of 81.8 percent.
Johnson & Johnson’s MedTech revenue was $27.4 billion last year, up 1.4 percent. This growth was driven by sales of industrial contact lenses, wound closure products and electronic products.
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The value of the Abiomed deal will have little impact on adjusted EPS this year, but the company says it will add $0.05 to adjusted EPS in 2024 and more later.
Johnson & Johnson’s association with high-net-worth investors means it isn’t always cheap, but because of its size it trades as high as 22 times, with earnings near the lowest in five years for the price range.
Keep in mind that if there is a corporate recovery in consumer healthcare (likely later this year), the company’s share should increase, as it is the only company sector that saw sales decline and 2022.
Jim Halley works at Johnson & Johnson. Motley is sponsored by Johnson & Johnson. Motley has a display policy.
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Invest better with The Motley Fool. Get stock tips, portfolio guidance and more from The Motley Fool’s premium service. After reviewing JNJ’s recent earnings, fundamentals and forward-looking financial projections, I believe Johnson & Johnson is a worthy candidate for an Investment Buy rating. JNJ’s mid-teens FY2022 P/E multiple is a no-brainer, but I’m bullish on the company’s medium-term outlook due to the decision to demerge. The consumer’s health is slow and limited.
It’s only natural that JNJ’s latest quarterly financial results have attracted attention, given the company’s role as a market leader in the healthcare sector. JNJ describes itself in its 2021 10-K filing as a company that “engages in the research and development, manufacturing and sales of various products for the healthcare industry.” It calls itself “the world’s largest healthcare company” on its company website.
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Johnson & Johnson’s signing went well after the results were announced. JNJ’s share price increased +6.0% from $162.97 on January 24, 2022 to $172.77 as of February 2, 2022. The company’s share price improved following the release of recent results and Q4 2021 results and expectations. guide 2022
According to earnings reports for the fourth quarter of 2021, Johnson & Johnson’s earnings per share and unadjusted earnings per share increased +10.4% year-over-year and +14.5% year-over-year to $24.8 billion and $2.13 billion, respectively. In addition, JNJ’s final figure for the fourth quarter was +0.5% above the consensus estimate.
While JNJ’s Q4 2021 revenue was -1.9% below sell-side analysts’ consensus estimate, the company’s +2.0% on the back of 2022 revenue of $99.65 billion is better than the market expected. More importantly, Johnson & Johnson’s interim EPS guidance for fiscal 2022 is $10.50, +1.7% above Wall Street analysts’ expectations.
In the next section, I’ll highlight two important points that investors should pay attention to from Johnson & Johnson’s latest financial results.
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I think JNJ’s key indicators are the company’s sales growth by segment and profit margin.
There is a distinct difference between the performance of Johnson & Johnson’s business units in 2021 and the fourth quarter of 2021. In the last fiscal year, JNJ’s medical devices business unit achieved double-digit growth rates. In contrast, its consumer healthcare business generated just one cent in revenue in its most recent fiscal year and quarter. It’s also worth noting that the healthcare segment had the lowest pre-tax profit of the three segments in the fourth quarter of 2021 and the fourth quarter of 2021.
Johnson & Johnson’s consumer health business is a clear drag on the company’s overall revenue growth, but it’s also the smallest of the company’s three divisions. That’s why it made sense for JNJ to separate its consumer health business from other high-growth companies in the industry, and that’s what Johnson & Johnson is doing.
The article emphasizes that JNJ will “separate its pharmaceutical and medical device businesses from its consumer products, creating two public companies.” Johnson & Johnson emphasized at JPMorgan’s ( JPM ) 40th Annual Health Care Conference that the two goals of the consumer health business separation plan are to “increase our performance, which we believe we can achieve through an appropriate model” and “exclude benefits” for shareholders. , as many of these deals have done in the past.”
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Johnson & Johnson’s healthcare business, which bills itself as “a provider of business intelligence to the global pharmaceutical, generics and biotechnology industries,” could be worth more than $45 billion. This is about 10% of JNJ’s current market capitalization, which makes the company open to expected earnings. Johnson & Johnson said at JPMorgan’s 40th annual healthcare conference that segmentation of its consumer healthcare business is expected to happen “by the end of 2023.”
Individually, Johnson & Johnson is doing well despite its high price, and that too
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